[credit_guy]

> Why would they hedge? They would lose pretty much all of the return that they were getting by going long duration.

In general you are right. But last year was special. Everyone and their grandmother knew the Fed will hike rates, numerous times. The Fed did not tire to tell that to whomever bothered to listen. Not putting any interest rates hedge on in such a situation sounds a bit crazy.

[helianer]

Sure, but they could have sold off a lot of their long term assets earlier instead. To me, the problem was not an outright lack of hedges, rather it was continuing to take too much risk all of the way down. Hedges only make sense to me if they were a cheaper way to achieve the same thing as selling the assets.